Andrew Leigh

E&OE TRANSCRIPT

RADIO INTERVIEW

RN DRIVE

THURSDAY, 17 DECEMBER 2015

SUBJECT/S: Tax transparency report; MYEFO; U.S. interest rates; polls.

PATRICIA KARVELAS: Qantas, Virgin Australia and Vodafone – they're household names – and nearly 600 more of the largest companies in Australia paid zero tax the year before last. On top of that is a long list of big businesses that paid a far lower rate of tax than most of us mere mortals. All has been revealed in a tax transparency report handed down by the ATO today. Andrew Leigh is the Shadow Assistant Treasurer and he's been a regular on Drive for a long time. We're welcoming him back for the last time this year; how are you, Andrew?

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Very well Patricia, how are you?

KARVELAS: I'm well. Are the rest of Australia's taxpayers getting ripped off by these big public and multinational companies?

LEIGH: Patricia, it certainly starts a conversation about tax fairness, which I think is the important thing about transparency. When the Liberal Party voted against tax transparency in 2013, they said: it doesn't matter, the tax office has the information so the public doesn't need to see it. But I think the advantage of having this information out in the public is that we get to have a conversation about whether our tax laws are keeping up with the very well-paid accountants who are looking for the next tax loophole, and whether there are tax loopholes that we ought to be looking to close.

KARVELAS: Assistant Treasurer Kelly O'Dwyer says that just because these companies didn't pay tax, it doesn't mean they're avoiding tax – is she right?

LEIGH: I was a little surprised that Kelly O'Dwyer's first instinct was to jump to the defence of these firms. I think you need to recognise that you can be strongly supportive of business without necessarily being supportive of loopholes. When firms are taking advantage of loopholes, that's more tax the rest of us have to pay. It's more tax that small businesses have to pay, and more tax that working Australians have to pay. With the plans that Labor has on the table, one of the ways in which we would look at budget repair is through our multinational tax plan which would raise $7.2 billion over the course of the next decade by closing down debt deduction loopholes that multinationals are using. That's one of the ways in which some of these firms have reduced their tax bill: by having internal debts and internal borrowings, whereas they owe very little to the banks. They're just borrowing between different arms of the same multinational entity. We don't believe you should be able to do that if you don't owe any debt to the banks.

KARVELAS: The Business Council says that the report, and I quote: 'highlights the significant contributions made by business.' The companies listed accounted for $40 billion of the $67 billion in company tax paid in 2013-14. Within the OECD only Norway taxes companies more as a share of the economy than Australia, they say. Are those fair points?

LEIGH: The point is subtly different on taxation. The point is that Australian corporate taxation as a share of our total tax burden is relatively high, and that's because we've got a lower consumption tax than most countries. But in fact if you look at the corporate tax rate in the 10 biggest economies in the world, the average is 29.6 per cent, and in Australia the rate is 30 per cent for big firms and 28.5 for small firms. So we're at about the average corporate tax rate of the biggest 10 economies in the world, and of course we've also got dividend imputation which basically gives a third of the corporate tax revenue back. Most countries don't have that. I think we compare alright in terms of the headline rate, but I do think you've always got to be looking at tax loopholes. In a week where Malcolm Turnbull and Scott Morrison have been proposing cuts to Medicare, cuts to job seeker services, cuts to family daycare and cuts to aged care, it's very surprising to me that they're not willing to consider Labor's plan to fairly tax multinationals.

KARVELAS: Let's get to that plan. You say you'd crack down on multinational tax in government and bring in $7 billion over a decade. Does that take into account the revenue that would be lost by some companies taking their business elsewhere? Because you can't deny it, inevitably some would shift their businesses if you were to do that, wouldn't they?

LEIGH: Patricia, I believe Australia should be an attractive destination for companies around the world, but we should be attractive because we have a fabulous workforce, great infrastructure and good productive capacity. Our comparative advantage shouldn't be: hey guys, look at this loophole we've poked in our tax code in order to get you to move here. That's not the right route for Australia, and frankly there's a bunch of countries around the world that will beat us if we try and play that game. Our plan has been carefully costed by the independent Parliamentary Budget Office, and it sits alongside a range of other Labor proposals, like getting rid of the slush fund for polluters, not paying a new $1,000 Baby Bonus, increasing cigarette excise and fairly taxing superannuation, that between them raise around $70 billion over the next decade. 

KARVELAS: The report covers public and foreign companies with revenue of $100 million or more. Labor has called the Greens spineless for agreeing to a $200 million threshold, but that's for private companies. Are you conflating these two different measures to paint the Greens as sell-outs?

LEIGH: Look, we might have been a bit too generous with those adjectives because frankly I was flabbergasted on the final day of Parliament this year when the Greens – after having talked the talk on tax transparency – folded and supported the wind-back of tax transparency. The effect of this is that for private companies, for which the data will be coming out next March, two-thirds of them will be taken out of the transparency net. What we've seen today, Patricia, is that – 

KARVELAS: Didn't they fold though, I feel like I need to interrupt here to make this point: didn't they fold because they thought this was the best possible deal they could get and make with the Government? They were improving a situation that they considered, and so did you, to be inadequate. Isn't that what politics is? It's about making deals.

LEIGH: What Scott Morrison had been saying is: if you don't agree to wind back tax transparency, I won't pass my multinational tax plan. Effectively Scott Morrison was holding a gun to his own head, but that was enough to fool the Greens. What the Greens did was unnecessary; the Government's position was never sustainable. Had the Greens supported tax transparency then today we would have transparency not just for big public firms, but also for big private firms with the same threshold. It was just unbelievable to me that the Greens folded on that, and I think the risk for the Greens is that since they're not a party of government, every time they make a decision that puts power before principle they risk going down the road that the Democrats so fatally went down in 1999 when they supported the GST.

KARVELAS: I'm sure you would like them to take that road, no doubt. Andrew Leigh, am I right?

LEIGH: They're taking it themselves, Patricia.

KARVELAS: But you'd love it if they took that road – you want them out of politics.

LEIGH: You see them making these mistakes systematically: in voting down an emissions trading scheme in 2009; in voting to remove the debt cap in 2013; in voting for tax secrecy in 2015. Each of those calls made because they're wanting to be part of the main game, rather than just sticking true to their principles.

KARVELAS: On RN Drive my guest is Andrew Leigh, he's the Shadow Assistant Treasurer. We're talking tax now but we're about to talk about something else, which is MYEFO. I'm wondering, Andrew Leigh, when will the Labor Caucus decide which MYEFO measures it will support and which it will block. Do you have a steer on which measures you think are unacceptable and which ones you're perhaps willing to look at?

LEIGH: We'll go through our usual processes, Patricia. There wasn't a mini-budget lock up on Tuesday and so we got to see the proposals for the first time on Tuesday afternoon. You'd expect us to take more than a day or two to work through our position on a range of big proposals. But certainly you would have seen the comments from Bill Shorten and Chris Bowen saying that we are particularly concerned about the cuts to Medicare bulk billing for diagnostic imaging and pathology. We'll bring out our positions on each of these proposals from the Government over the coming days.

KARVELAS: How about other proposals like the cuts to the Green Army – or the cap, rather – that has been imposed. Is that something you'd be more open to?

LEIGH: We'll look at each of these one-by-one, Patricia. But we'd also like it if the Government would look at some of the proposals Labor has put on the table. Over the course of this year we've rolled out more than 50 policies, and a range of those are policies which have the great benefit that the Government's slash-and-burn approach doesn't have: they don't hurt growth and they don't make inequality worse. So often in the 2014 Budget, the 2015 Budget and now this latest mini-budget, Scott Morrison and his predecessors have taken the approach that there is only a spending problem and you've just got to keep on cut, cut, cutting into spending. But we've got the best-targeted social safety net in the advanced world. So you rip a dollar out of our social safety net, and as you well know Patricia, that hurts the poor more than it would in any other country in the advanced world. By contrast, if you look at something like fair taxation of multinationals, we can do that in a way that doesn't worsen inequality and doesn't impair growth. 

KARVELAS: Just before I let you go, can I ask you as a non-partisan economist – if you can try and put on that hat for us, obviously you are a Labor frontbencher – what does the U.S. Federal Reserve's lifting of official interest rates mean for us here in Australia? What are the implications? 

LEIGH: Well I expect that it will mean rates will begin to go up in Australia as well. We've had rates which, according to analysis by the British Treasury, have been at thousand-year lows. I think they said 4,000 year lows, although questions remain about how good our estimates of interest rates are when we go back to 2,000 BC. But very, very low interest rates for quite a long time now. As they start to go up in the United States, you'd expect that will put upward pressure on rates in Australia. That then carries a risk for the many Australians who are carrying significant mortgage debt and who have taken on those mortgages in anticipation that rates would remain low. I hope that this transition will be a fairly smooth one for Australia, but it's a risk that's there in the economy alongside the various risks that exist in the Chinese economy. U.S. rates and the Chinese economy are the two big threats to Australian growth that I see could potentially strike us in 2016. 

KARVELAS: Andrew Leigh, we're about to wrap up the year and you're entering what is next year going to be an election year – whether it happens early or it happens at the end of the year. With an opposition leader with record-low polling, a political party with record low polling, are you going to remove your leader?

LEIGH: No. Of course not, Patricia. 

KARVELAS: So you're willing to lose instead?

LEIGH: Not at all. 

KARVELAS: Aren't you on track to lose at this stage?

LEIGH: Patricia, we are the underdog, and I don't think anyone would be surprised by that. You've got to look back to the 1930s to find a federal opposition that managed to win in a single term. But we're up for the fight, and we certainly have been rolling out the policies. As I said, more than 50 policies this year. Bill Shorten has been out there in every forum, whether it's on TV, on radio, on social media, town halls – 

KARVELAS: Sure, but the public is expressing that they just don't like him.

LEIGH: I take very little notice of polls, Patricia. I've been arguing consistently that we pay too much attention to horse-race polls for more than a decade. Whether Labor is up or whether Labor is down, I just think those horse-race polls are much less informative than the conversations about values and policies that we've been engaged in up to now. I know Bill is pretty passionate about a range of policies that build a better Australia, and a fairer one at that. He will be making the case that raising the GST to 15 per cent while leaving Labor's multinational tax plan on the table is just the wrong answer for Australia. Whether your question is: how do we boost household consumption, how do we make this a fairer country or how do we help young Australians break into the housing market, raising the GST is the wrong answer to any of those questions. 

KARVELAS: Andrew Leigh, thank you so much for joining me tonight. I hope you have a very good Christmas and break, and I'll speak to you again next year.

LEIGH: Thanks Patricia, you too.

ENDS

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